CHAPTER 3 STRUCTURING OF MINING VENTURES IN LATIN AMERICA — PANEL DISCUSSION

• Jurisdiction: Derecho Internacional

MINING LAW & INVESTMENT IN LATIN AMERICA
(April 2003)
CHAPTER 3
STRUCTURING OF MINING VENTURES IN LATIN AMERICA — PANEL DISCUSSION
Ignacio M. Aguirre
Bufete Aguirre S.C.
La Paz, Bolivia
Juan Pizarro-Suarez
Miranda, Estavillo, Staines y Pizarro-Suárez, S.C.
Mexico City, Mexico
James K. Aronstein
Ducker, Montgomery, Lewis & Aronstein, P.C.
Denver, Colorado, USA
Cristián Quinzio S.
Quinzio Novoa & Bórquez
Santiago, Chile
Daniel Armando Bianchi
Estudio Allende & Brea
Buenos Aires, Argentina
Emil Ruppert
Estudio Rubio, Leguía, Normand & Asociados
Lima, Peru

DUCKER, MONTGOMERY, LEWIS & ARONSTEIN, P.C.

ATTORNEYS AT LAW

ONE CIVIC CENTER PLAZA

1560 BROADWAY, SUITE 1400

DENVER, COLORADO 80202

303-861-2828

TELECOPIER 303-861-4017

JAMES K. ARONSTEIN

E-mail: jaronstein@denverlaw.com

March 21,2003

VIA EMAIL

Daniel A. Bianchi

Allende & Brea

Maipu 1300, Piso 10, C1006ACT Buenos Aires, ARGENTINA

Ignacio M. Aguirre U.

Bufete Aguirre S.C.

P.O. Box 994, LaPaz, BOLIVIA

Cristián S. Quínzio

Quinzio, Novoa y Borquez

Av Apoquindo 3721, Of. 73, Las Condes, Santiago, CHILE

Juan Pizarro-Suárez V.L.

Miranda, Estavillo, Staines y Pizarro-Suárez, S.C.

Blvd. Virreyes No. 135, Mexico City 11000, MEXICO

Emil Ruppert

Estudio Rubio Leguia Normans

Avenida Dos de Mayo 1321, San Isidro, Lima 27, PERU

Re: Panel Discussion

Gentlemen:

I am delighted that you will be participating in the panel discussion on "Structuring of Mining Ventures in Latin America" at the Rocky Mountain Mineral Law Foundation's Special Institute on Mining Law and Investment in Latin America in Lima, Peru. Our panel will be presented on Monday morning April 28, 2003.

In order to organize our discussion and to keep it both entertaining and practical, I will play the role of General Counsel of Yankee Mining Corp., a fictitious American mining company

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("Yankee"). I will be seeking advice from each of you in connection with a prospective joint venture transaction in your country.

Attached please find a letter from me, as General Counsel of Yankee, to you, as Yankee's new local attorney in your country. The letter describes the essential business terms of a prospective joint venture between Yankee and Minera Norte, S.A. ("Norte"), a local subsidiary of Northern Mining Corp., a fictitious British Columbia corporation. After detailing the agreed upon business terms of the transaction, the letter suggests three possible structures for the joint venture. The letter asks you to comment upon the advantages and disadvantages of each structure, the specific means of implementing the structures in your country and the legal issues and obstacles that would need to be overcome. Finally, the letter asks for your advice as to how best to proceed.

Please send me a reply, staying within your role as Yankee's new local attorney. Try to answer the specific questions posed in my letter, refer to the details of the hypothetical transaction and use the names and terminology employed in my letter. In short, please reply to the enclosed letter in the same manner that you would if Yankee and the transaction were real.

My letter and your reply will serve as the basis for our panel discussion in Lima. At the outset of our presentation, I will summarize my letter to each of you and the hypothetical joint venture transaction. Each of you will then have the opportunity to summarize your reply letter. Finally, I will ask a number of follow-up questions which I will formulate after studying your reply letters.

I would like to include my letter to you and your reply letters in the Institute materials to be distributed to each of the conference attendees in Lima. Accordingly, I would appreciate receiving your reply letters as soon as possible. I apologize for not getting this letter to you sooner. However, in keeping with the "real world" approach to our panel, I would ask only that your reply be of the length and with the detail that would be found if your reply was to the General Counsel of a real Yankee Mining Corp. that solicited your advice on a tight deadline. Please keep your reply correspondence practical and business like, rather than formatting it as a traditional academic paper. This should also help expedite the preparation of your reply. You will have the opportunity to elaborate on important details in the panel discussion.

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I look forward to receiving your reply correspondence and to our panel in Lima. In the meantime, please do not hesitate to contract me if you have any questions or comments. Thank you again for your cooperation and your participation on the panel.

Very truly yours,

James K. Aronstein

JKA/dr

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YANKEE MINING CORP.

ONE CIVIC CENTER PLAZA

1560 BROADWAY, SUITE 1400

DENVER, COLORADO 80202

303-861-2828

TELECOPIER 303-861-4017

March 21,2003

VIA EMAIL

Daniel A. Bianchi

Allende & Brea

Maipu 1300, Piso 10, C1006ACT Buenos Aires, ARGENTINA

Ignacio M. Aguirre U.

Bufete Aguirre S.C.

P.O. Box 994, La Paz, BOLIVIA

Cristián S. Quínzio

Quínzio, Novoa y Borquez

Av Apoquindo 3721, Of. 73, Las Condes, Santiago, CHILE

Juan Pizarro-Suarez V.L.

Miranda, Estavillo, Staines y Pizarro-Suarez, S.C.

Blvd. Virreyes No. 135, Mexico City 11000, MEXICO

Emil Ruppert

Estudio Rubio Leguia Normand

Avenida Dos de Mayo 1321, San Isidro, Lima 27, PERU

Re: Prospective Joint Venture Transaction

Gentlemen:

I am the Vice-President for Legal Affairs and General Counsel of Yankee Mining Corp. ("Yankee") a Delaware corporation. We are considering entering into a joint venture with Northern Mining Corp. ("Northern"), a British Columbia corporation. Northern's wholly owned subsidiary, Minera Norte S.A. ("Norte", a company incorporated in your country), owns the Rico mining concession (the "Concession") in the northern part of your country. Initial exploration results on the Concession have been encouraging and Northern and Yankee have tentatively agreed to conduct further work on the Concession on a joint venture basis. I would like to obtain your advice as to how best to structure the joint venture.

The fundamental business terms which have been agreed upon by Yankee and Northern

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are as follows:

• The initial Equity Interests of Norte and Yankee in the joint venture (the "Venture") will be 40% (Norte) and 60% (Yankee).

• As its Initial Contribution to the Venture, Norte will contribute the Concession.

• As its Initial Contribution to the Venture, Yankee will fund the first US$5 million in further exploration work on the Concession. This amount must be expended within three years, or Yankee will forfeit its entire Equity Interest in the Venture.

• Upon the completion of Yankee's Initial Contribution, Norte and Yankee (the "Participants") will fund approved Programs and Budgets in accordance with and proportionate to their respective Equity Interests in the Venture. However, within twenty (20) days after the approval of a Program and Budget, either Participant may elect not to contribute to the funding of the Program. In that case, the non-contributing Participant would be diluted and the Equity Interests of the Participants would be recalculated based upon their total contributions to the Venture.

• A management committee or board (the "Management Committee"), comprised of two representatives appointed by Norte and two representatives appointed by Yankee, will be responsible for the overall management and direction of the Venture. Most decisions of the Management Committee, including the approval of Programs and Budgets, will require the voting support of the representatives of a Participant or Participants holding Equity Interests greater than 50% (a "Simple Majority"). However, certain fundamental decisions, such as a decision to sell, mortgage or encumber the Concession, would require the voting support of representatives of a Participant or Participants holding Equity Interests greater than 75% (a "Super Majority").

• A Manager will be responsible for the day-to-day management of the Venture, conducting operations and carrying out approved Programs and Budgets and other decisions of the Management Committee, In addition to being reimbursed for all expenses incurred in carrying out Programs and Budgets, the Manager will be paid a Management Fee to defray home office overhead and general and administrative expenses. The Participant or Participants holding Equity Interests greater than 50% will be entitled to appoint or replace the Manager.

• Any dispute that arises under or with respect to the Venture will be determined by

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binding arbitration in Denver, Colorado in accordance with the Commercial Rules of Arbitration (the "Rules") of the American Arbitration Association (the "AAA").

Regardless of the structure selected for this transaction, the essential business terms set forth above must be respected. We are relatively flexible with respect to other matters.

I am not familiar with the laws of your country, but I have worked on similar transactions in other parts of the world. Based upon my experience, I am considering, and would like your advice concerning, the following three possible structures for this transaction:

Structure 1. Northern and Yankee would establish a jointly owned company ("Newco") in a tax friendly common law jurisdiction outside of your country (the "Offshore Republic"). Northern would transfer and convey all of the share of Norte to Newco. The Operations of Norte would be funded by equity contributions or shareholder loans from Newco. The funding and management of Newco, as well as all of the other essential joint venture business terms outlined above, would be established, implemented and governed by the Shareholders' Agreement and Bylaws of Newco under the laws of the Offshore Republic. I am familiar and comfortable with the laws of the Offshore Republic and have complete confidence that they...